Distant Future Cars... 80% of Complete Vehicle and Parts Companies "Cannot Enter or Make Profits"

KAIA Survey on Future Car Transition... 300 Completed Vehicle and Parts Companies Participated
56% "Not Entered Future Car Field" 23.7% "No Profit Realized"
R&D Difficulties "Funding Shortage" 47%... Followed by Lack of Experts and Core Technology

[Asia Economy Reporters Kim Hyewon and Yoo Jehun] It has been revealed that 8 out of 10 domestic complete vehicle and auto parts companies have neither entered the future car sector nor generated profits. Experts pointed out that for an “orderly” transition of the industrial ecosystem, the government should support internal combustion engine and hybrid vehicles as cash cows for a certain period while also providing comprehensive support for research and development (R&D) and workforce acquisition.

The Korea Automobile Industry Association (KAIA) held the 21st Automobile Industry Development Forum on the 14th under the theme “Survey Results and Implications on the Management and Future Car Transition of the Automobile Industry,” announcing the results of the survey. This second survey following last year was conducted by the professional research firm Mega R&C from August 31 to October 22, with participation from 300 domestic complete vehicle and parts companies and 405 workers.

According to KAIA, among the 300 respondents, 169 companies (56.3%) have yet to enter the future car sector. Among companies that have entered the future car sector, 71 companies (23.7%) have not realized profits. Although this is a slight improvement compared to last year’s results (non-entry 60.2%, profit generation 17.8%), still 80% of companies remain either unentered or unprofitable in the future car sector, showing stagnation.

Companies that have entered the future car sector also face considerable difficulties. In a survey of 131 companies already in the sector, the average time and cost to mass-produce one type of future car part were 1.314 billion KRW and 13 months, respectively, and 35.5% responded that it takes at least five years after entry to mass-produce products. KAIA Chairman Jeong Manki stated, “For an effective future car transition, government support should continue so that hybrid vehicles can serve as cash cows for a certain period.”

The Public Sector Is Idle While Private Investment Stagnates

The main difficulties related to future car R&D were lack of funds (47.3%), shortage of skilled personnel (32.1%), and lack of core technology (13.0%). Notably, the proportion of financial difficulties as an obstacle to facility investment surged by 14 percentage points compared to last year (63.9%), indicating worsening financing conditions for companies.

The problem is that the ecosystem transition to future cars is slow for various reasons, and competitiveness in existing industries is weakening, raising concerns about hollowing out of the automobile industry. Among the 300 respondents, 44.1% had sales structures concentrated on internal combustion engine-only products, and 32.7% had powertrain-related products as their top sales item. Regarding mid- to long-term sales prospects for main products, 58.3% answered “stagnation” and 15.3% “decline.” As the industrial ecosystem shifts toward electric-powered vehicles, related companies are increasingly likely to face management difficulties. Professor Jang Seokin of Korea University of Technology and Education pointed out, “Many companies still face crises within the existing internal combustion engine vehicle ecosystem, and innovation for structural transition to a future based on new technologies is slow due to various inadequate conditions and high transition costs.”

Labor Shortage Compounded by Aging

In this rapidly changing automobile industry, voices criticized that only private companies are struggling while the government and public sectors play insufficient roles. Among the 300 companies, the most common institutions consulted for future car entry were complete vehicle manufacturers and suppliers (57.3%), while public institutions accounted for only 4.6%. Regarding technology acquisition, 93.2% responded that they develop technology in-house or jointly with complete vehicle manufacturers, whereas less than 5% developed technology through government or industry-academia cooperation.

Additionally, unlike previous years, this survey highlighted difficulties in production competitiveness due to skilled labor outflow (40%) and aging (27.3%). To address aging, 73.1% responded that retirement age extension is necessary, but this was based on the premise of establishing a separate wage system such as a wage peak system (74.6%). There was also a separate opinion that the government should prepare support measures because extending retirement age could increase youth unemployment (27.6%).

Having experienced this year’s vehicle semiconductor shortage, timely responses to sudden order volume changes through working hour adjustments or line volume adjustments are necessary, but concerns were raised about the overly rigid labor-management relations. The subcontracting system emerged again as an alternative. Kim Juhong, head of the Korea Automobile Industry Association, emphasized, “Labor market changes are needed amid the automobile industry transformation, but labor-management relations remain confrontational and wasteful. Temporary subcontracted labor should be utilized for new car production or volume fluctuations.” Furthermore, over 50% responded that the appropriate interval for labor-management wage negotiations is two years or more, and 43% cited differentiated performance bonuses as the most effective motivation method.

This content was produced with the assistance of AI translation services.